Why have a Trading Plan

Stock Trading System and a Trading Plan

No matter what type of financial instrument they are trading, successful traders will always utilize a stock trading system. In other words, they do not make random trades and instead they will always trade according to a carefully thought out trading plan or system.

On the other hand, unsuccessful traders do not use a stock trading system and will instead behave more like gamblers when they are trading stocks. Specifically, unsuccessful traders will attempt to apply any and all of the trading knowledge that they have gained as well as any news or “hot tips” they hear and end up trading in a completely haphazard or undisciplined manner.

Moreover, unsuccessful traders will often make trades based on emotions or what they feel to be “instinct.” And while this type of “stock trading system” can make money in the short term and also be exciting; over the long term, such an undisciplined approach is sure to be a money looser. After all, stock trading can be emotionally draining and any trader behaving like a gambler may well tire themselves out long before they run out of capital to trade or begin to suffer heavy trading losses.

Instead, successful stock traders will trade according to a carefully thought out stock trading system that will likely be really boring to execute over and over again but will surely be much more profitable over the long-term. However, using a stock trading system will require patience and discipline on the part of the trader as he or she will need to stick with the system for the long-term in order to realize any profits.

Stock Trading System – resist straying from your plan

Most importantly, a trader using a stock trading system will need to resist the temptation of straying away from trading plan – even when their instinct or emotions tell them to do so. In other words, successful stock traders will patiently wait for the correct trading signal to appear before they execute a stock trade. Moreover and when there seems to be reasons for a stock trading signal to be ignored or for not executing a trade, they will still execute the trade according to their stock trading system.

However, it’s important to also remember that successful stock traders do not develop a stock trading system and become successful overnight or even in a few weeks time. Likewise, successful stock traders do not become successful by reading a couple of books or taking a brief stock trading course. Instead, successful stock traders will constantly expose themselves to new and potentially profitable trading ideas and gain practical experience by watching the stock markets and how individual stocks behave on a day-to-day basis. They will then use their observations and knowledge to develop a stock trading system over time.

In other words, developing a successful stock trading system as well as becoming successful with stock trading itself will be a long term learning process requiring a significant amount of patience and discipline on the part of the trader.